MAA716 Financial Accounting
WRITTEN ASSIGNMENT – TRIMESTER 1, 2014
PART 2 – QUESTION 2

Submission date and available mark

Due date: Friday 9 May 2014 before 11.59 pm
Marks: This Written Assignment represents 4 0% of the total mark for the unit and consists of three questions. Question 1 will be marked out of 40 and converted to a mark out of 15%.

Assignment instructions

1. Please monitor CloudDeakin for any instructions/announcements.
2. You will need to have completed topic 7 to complete this question (Q2).

Submission instructions

1. This assignment is to be submitted ONLINE ONLY (You are NOT required to submit a hard copy).
2. You must type in your answer for each question.
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4. You are not required to upload an Assignment Cover Sheet. You will complete a Plagiarism declaration when you access the Dropbox.
5. Once submitted you cannot take your assignment back BUT you CAN SUBMIT another version. The most recent version submitted will be marked.

A note on plagiarism and collusion

Plagiarism and collusion are forms of cheating and is considered a serious academic misconduct, a n d severe penalties are associated w i t h them. Please refer to the MAA 716 u n i t guide for your responsibilities w i t h regard t o plagiarism a n d other academic offences.

Penalties applied in this assignment
1. Assignment submitted after the due date will attract a penalty of 3 marks per day (out of the total of 40 marks for Question 2).
2. The final examination is the only hurdle requirement for the unit. If you choose not to submit this assignment you will score zero. There is no provision for the mark to be added to the final exam mark.


Discussion area for this assignment

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Receiving your mark and suggested solution
Your mark for the assignment will be available in Grades within 15 working days from your assignment submission date.

The financial accountant of Carlton Ltd has prepared draft financial statements for the year ended 30 June 2014 but is unsure about the tax calculations.

Draft income statement for the year ended 30 June 2014

R evenue 10,000,000
C ost of sales -4,000,000
Gr oss profit 6,000,000
Ot her income
Royalty income 243,000
Profit on sale of motor vehicle 68,000
Grant income 143,000
454,000
Ex penses
Depreciation - motor vehicles 315,000
Depreciation - Plant & equipment 172,000
Entertaining 18,650
Annual leave 152,000
Repairs 255,000
Bad and doubtful debts 203,000
Rent 264,000
Other expenses 3,000,000
4,379,650
Pr ofit before tax for the year 2,074,350

Extr act s from the draft statement of financial position as at 3 0 June 201 4
2014 2013
Assets
Cash 803,500 975,000
Accounts receivable 2,500,000 2,300,000
Less provision for doubtful debts 143,000 123,000
Inventory 2,600,000 2,150,000
Prepayments (rent) 34,750 40,100
Royalty income due 22,950 45,915
Deferred tax asset ? ?
Motor vehicles 1,098,000 1,800,000
Plant & Equipment 1,033,110 1,205,295
Goodwill 370,000 373,500

Liabilities
Accounts payable 1,980,000 1,800,000
Accrued annual leave 43,000 34,000
Provision for repairs 100,000 110,000
Bank loan 3,500,000 3,580,000
Current tax payable ? 48,000
Deferred tax liability ? ?

Required:

Additional information
1 The tax rate is: 30%
2 Grant income is exempt from tax
3 Entertaining expenses are not allowable deductions for tax
4 Excluding revenue and cost of sales other income and expenses are taxed on a cash basis
5 The carrying value and the tax base of the vehicle sold were:
Carrying value 430,000
Tax base 344,000
6 Ta x depreciation for the year was:
Motor vehicles 400,000
Plant & Equipment 200,000
7 Th e tax base of the assets at the start of the current year were:
Motor vehicles 1,600,000
Plant & Equipment 1,060,000

a) Prepare the current tax work sheet and journal entry/entries to calculate and record the current tax for the year ended 30 June 2014 as per AASB 112 “Income taxes”. (10 marks)
b) Justify your treatment of entertainment expense and exempt income in the current tax work sheet. (5 marks)
c) Prepare deferred tax work sheet to calculate deferred tax asset and liability as at 30 June 2013 and 30 June 2014 and prepare journal entry as per AASB 112 “ Income Taxes” for 30 June 2014 (create columns for account name, carrying amount, tax base, deductible temporary difference and taxable temporary difference).
(15 marks)
Question 2

Evaluate whether deferred tax assets and deferred tax liabilities arising from AASB
112 “ INCOME TAXES” meet the definition and recognition criteria outlined in the conceptual framework. (10 marks)